Gateway says it expects to receive net proceeds of $483 million from the transaction when it closes. Gateway says its wholly owned subsidiaries have long-term leases for each of the properties and will continue to operate the casinos, with no expected changes to employees or operations.

Real estate portfolio of $200M

Following the transaction, Gateway says it will still hold a real estate portfolio with a book value of more than $200 million. It also continues to evaluate real estate investment opportunities in and around its operations.

“This traditional real estate transaction unlocks significant value and generates cash which the company will use to reduce debt, invest in Gateway’s growth, support new developments and job creation, and deliver value to our stakeholders,” said Tony Santo, Gateway’s CEO, in a release announcing the transaction.

“With robust growth, sophisticated operations and excellent customer service at our properties across the country, Gateway has established itself as the leading gaming and entertainment operator in Canada. We look forward to continuing to advance our operations and to build new community partnerships as we execute on our growth plans.”

Gateway said it plans to use the full amount of the proceeds, $483 million, to repay a portion of its existing loans. It also plans to enter into an agreement with a syndicate of lenders for a new senior secured credit facility to refinance the remaining portion of its senior debt.

ADVERTISEMENT

When the transactions are concluded, and pending the required approvals, Gateway says its total debt will be reduced from $953 million to $702 million. Cash on hand will increase from $119 million to $214 million.

Gateway has expanded to 25 properties

With 25 properties – up from 12 in 2015 – Gateway has significantly expanded its footprint and portfolio in recent years. Through this growth, Gateway’s pro forma annual revenues, EBITDA and free cash flow for the 12 months ended Sept. 30, 2017, were approximately $590 million, $156 million, and $139 million, respectively.

Over the same period, the company has diversified and expanded its product offering, including developing proprietary casino and restaurant brands, which has increased its operating performance and real estate value.

Gateway’s current projects include a $57 million rebrand and renovation of the Palace Casino at the West Edmonton Mall to Starlight Casino Edmonton; a proposed $70 million local entertainment destination in Delta, B.C.; renovations and rebranding at Kelowna, Chances Campbell River and Chances Courtenay; and the first Gateway redevelopment in Point Edward, Ont., to be rebranded Starlight Casino Point Edward.

“We have dramatically changed Gateway’s performance profile, positioned it to reduce debt and expanded both the company’s top and bottom line, giving it significant opportunities for growth and a high return on capital,” said Gabriel de Alba, Gateway’s executive chairman, in the release.

“With strong future cash flow generation and other strategic opportunities to unlock value, Gateway is extremely well positioned to execute on its corporate strategy and deliver outstanding results over the long-term.”

Mesirow’s first Canadian transaction

Mesirow Financial’s Sale-Leaseback Capital group arranged for the purchase of the three Gateway properties. The acquisition financing is being structured in collaboration with Mesirow Financial’s Credit Tenant Lease (CTL), as well as its Institutional Sales and Trading division.

“This transaction once again signifies the strong collaboration between our capital markets businesses. We continue to enhance our full-service platform in acquiring single-tenant properties, now internationally, complemented by our strong capabilities in debt placement,” said Dominick Mondi, president of Mesirow Financial and of its Capital Markets Division, in the release.

This will be Mesirow’s first such transaction in Canada.

“After having closed more than US$1.5 billion in sale-leaseback transactions in the last two years, we are excited to be closing on Mesirow Realty Sale-Leaseback’s first cross-border transaction monetizing these three exceptional and strategic assets,” said Doug Barker, senior managing director of Mesirow Financial, in the release.

The transaction is expected to close in the first half of March, subject to final documentation and customary closing conditions.

About Gateway Casinos & Entertainment

Gateway is the largest and most diversified gaming company in Canada. Operating in British Columbia, Edmonton and Ontario, Gateway has 6,000 employees and operates 25 gaming properties with 282 tables, more than 9,500 slots, 68 restaurants and bars and 272 hotel rooms.

As the selected service provider in Southwestern and Northern Ontario, Gateway will undertake two new planned builds in North Bay and Kenora. Gateway is undertaking an ambitious growth strategy to dramatically improve the customer experience and attract new customers.

About The Catalyst Capital Group Inc.

The Catalyst Capital Group Inc., a private equity investment firm with more than $6 billion in assets under management founded in 2002, is a leader in operationally focused turnaround investing. The firm’s mandate is to manufacture risk-adjusted returns, in keeping with its philosophy of “we buy what we can build.”

The Catalyst team collectively possesses more than 110 years of extensive experience in restructuring, credit markets and merchant and investment banking in Canada, the United States, Latin America and Europe.

About Mesirow Financial

Mesirow Financial is an independent, employee-owned firm founded in 1937. As specialists in investment, risk management and advisory services, it is committed to helping our institutional, corporate and individual clients achieve their objectives.

Its professionals are inspired by an entrepreneurial desire to develop tailored solutions that deliver measurable results.